Articles Posted in Outside Counsel

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I have speculated on how groups of law departments might share confidential evaluations they make of law firms (See my post of May 14, 2006.). Multi-source data would enable contributor departments to manage their external costs more effectively. What are some metrics-based conclusions general counsel might draw from the larger collection of data?

For common services, law departments could compare average burn rates (See my posts of Aug. 31, 2005: litigation burn rates; and Feb. 20, 2006: burn-rate calculations.).

Law departments could surface violations of discount agreements or most-favored client terms (See my posts of Oct. 30, 2005 and Nov. 21, 2005: most-favored-nation terms; Nov. 13, 2006: hourly rates only; Jan. 25, 2006: least-favored terms; and Jan. 20, 2008: my article on them.).

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Tom Wakefield, the general counsel of Cessna Aircraft, praises Stinson Morrison Hecker in an ad, one of which is in InsideCounsel, March 2008 at 54 (See my posts of May 27, 2007: five examples of senior lawyers in ads; and Jan. 18, 2008 #1: one more.). It is the small-print warning at the bottom of the ad that deserves profound thought: “The choice of a lawyer is important and should not be based solely on advertisements. (Mo. Sup. Ct. Rule 4-7-2).” I, too, side with the deliberations of Missouri’s highest court and plead with general counsel not to pick external counsel merely because they like the firm’s ads.

Silly, isn’t it, that the finest judicial minds of the Show Me State had to pause even a moment on this. Lay people might be manipulated by a billboard for a lawyer but in-house legal talent isn’t that gullible, right? Other aspects of marketing, however, may worm their way into a decision (See my post of March 23, 2006: pigments in graphic icons of firms; Nov. 27, 2007: brands and law firms, with references cited; July 4, 2006: effectiveness of law firm websites; Aug. 26, 2005: internet searches to find firms; Nov. 5, 2007: ineffectual marketing methods; Sept. 21, 2005 and Jan. 16, 2006: permission to refer to a client.).

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Better late than never.

Today and tomorrow in Orlando, Florida, the Council on Ethical Billing is holding its annual conference. More than 30 “experienced insurance and litigation management professionals” will speak and facilitate breakout sessions “covering litigation management, e-billing, e-discovery and more.”

I was not aware of this organization until I saw an ad for its conference. The Council appears to be in part a way for claims managers and others in the insurance industry to give a seal of approval to law firms and individual lawyers who strive for good practices in billing. The Council has a distinguished Advisory Board. It promotes awareness of ethical billing practices and education on the same. Details will follow as I find out more.

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Earlier I made available my collection of six articles on productivity (See my post of March 5, 2008.). Here are another six articles, with additional material from this blog, on the topic of how to control the costs of outside counsel. Click on the link for the PDF –> Download rees_morrison_cost_control_articles_compilation.pdf

You might want to e-mail this to an interested colleague.

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In a recent article, published in CCCA, the quarterly of the Canadian Corp. Counsel Association (Fall 2007 at 10), I distinguish between elaborate guidelines for outside counsel and more “constitutional” statements of basic principles. If you want to see a PDF of my article on guidelines compared to law-firm engagement letters topic, click here Download rees_morrison_hard_or_line_on_outside_counsel_guidelines.pdf

. I favor the broad statements of principle, by the way.

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Law departments that seek budgets from their outside counsel need to grapple with the threshold (or thresholds) for those budgets. They need some guidelines for what level of anticipated spending triggers a budget. Paul Roy, Director of Finance & Administration of Time Warner Cable’s Law Department, explains that his policy is that “if more than $15-20,000 per month will be spent for three months” the firm needs to submit a budget. How far out does a the budget extend? “About a quarter” or if there is a predictable path and outcome such as the filing of a motion for summary judgment. With that rule-of-thumb of amount and extent, a matter might have a budget for one quarter but not for the next.

Some law departments set their thresholds much lower. Roy feels that budget triggers like $50,000 in a year is pretty small, at $4,000 a month. With his higher threshold, in his department the amount that is covered by a budget is 5-10 percent or so for both matters and spending.

The corresponding matter budget is attached to each bill so the lawyer can see it. In Roy’s experience, no matter how carefully the firm and the responsible lawyer pore over the budget at the start of a quarter, “Circumstances always seem to change.” A benefit, nonetheless, is that for some partners if their budget is broken badly, they are more inclined to write off time. They feel a bit guilty.

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As I have mentioned, the Round Table Group is a leading firm to help locate and manage expert witnesses (See my post of Feb. 13, 2008.). Steve Schott of the Group was kind enough gather some information for Law Department Management and to provide some metrics that might interest readers.

According to Round Table data, approximately 22 percent of state civil cases and 25 percent of federal cases involved at least one expert witness. Approximately 7-10 percent of the cases in which an expert is used require expert testimony. The Round Table at this times doesn’t have specific information regarding percentages of time experts spend in other roles (i.e., document review, consulting, testing, etc.).

The average hourly rate of a Round Table Group expert is approximately $299.

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Most in-house lawyers at some point have to review bills from outside law firms (See my posts of Nov. 3, 2005: standardized practices (July 16, 2005: one of the most popular methods of controlling outside counsel costs.). Even with a fixed-fee arrangement, the department needs to receive and review bills (See my post of Sept. 13, 2006.). Some lawyers are expected to spend quite a bit of time on invoice approval (See my posts of Sept. 14, 2005 and May 1, 2006: time spent on invoice review.), which is easier to do if the bills come in a pre-defined format (See my post of Feb. 21, 2007.).

Ways to review bills are varied (See my posts of Oct. 15, 2007: inductive or deductive approach; March 23, 2007: some statistical analyses; Jan. 4, 2006: spreading acceptance of e-billing; and Dec. 11, 2006: my article with 13 ways to more insights from invoices.).

Others besides the lawyer responsible for the matter may also look at bills (See my posts of Oct. 15, 2007: client gatekeeper; and Nov. 10, 2007: three-way approval process for invoices: lawyer, client and finance.).

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This blog has come at the topic of fixed fees from a flexibly broad range of perspectives.

Some posts have focused on terminology (See my posts of Nov. 22, 2006: “capped fees” vs. “fixed fees”; Nov. 6, 2005: per case vs. per group of cases; Nov. 22, 2006: “fixed” vs. “flat”; April 5, 2006: compared to retainer fees; and May 24, 2006: unit billing.).

The mechanics and negotiation of fixed-fee arrangements have cropped up (See my posts of Nov. 24, 2007: law department must commit to certain levels of support; Sept. 13, 2006: out-of-pocket disbursements; Dec. 15, 2005 and Jan. 25, 2006: fees per stage, activity or milestone; Dec. 7, 2005: collars to prevent injustice; Dec. 10, 2007; flexibility, always upward it seems; Oct. 31, 2007: competitive bidding processes; May 26, 2007: typical time periods for an arrangement to apply; Sept. 4, 2006: budgets and fixed fees; Sept. 13, 2006: still need to review bills; and Jan. 13, 2008: delay in the process saps the appeal.).

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Risks exist for law firms who take on matters on a contingency-fee basis. As graphically described in Inside Counsel, Feb. 2008 at 16, if a client chooses down the road not to pursue what would make its law firm eligible for its contingency fee, tough luck for the law firm. For example, if a company agreed to pay a bonus for a victory at trial, the law firm receives nothing if the company settles the case before the trial concludes.

Because of this eventuality, both the firm and the department need to envision performance rewards that will make sense no matter what happens. That foresight takes time (See my post of Nov. 6, 2007: alternative fees take time.) but you want neither dashed expectations nor fee arrangements driving strategy (See my post of Sept. 28, 2007: be wary of incentives.).